Abstract:
How does economic growth affect individual wealth accumulation and, thereby, wealth inequality? Combining individual wealth from the Socio-Economic Panel (SOEP) and local GDP growth across 401 German counties, this paper documents a sizable Hometown-Growth-Wealth Nexus. We find that past variation in hometown growth across cohorts and regions contributes to high wealth inequality today. Individuals exposed to high growth during childhood save more and are more likely to be invested in housing. While this savings channel operates for heirs and non-heirs alike, heirs from the same hometown are richer. We validate the Hometown-Growth-Wealth Nexus and the savings channel for the UK.